Baking business isn't as easy as pie

Anna Derivi-Castellanos (left) and Lenore Estrada finish up some California key lime pies in their South San Francisco commercial kitchen. Their Three Babes Bakeshop makes everything by hand, including individually rolled pie crusts, below. less

Anna Derivi-Castellanos (left) and Lenore Estrada finish up some California key lime pies in their South San Francisco commercial kitchen. Their Three Babes Bakeshop makes everything by hand, including ... more

Photo: Brant Ward, The Chronicle

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Everything about the pies is hand made, including the pie crust, which is rolled out individually.

Everything about the pies is hand made, including the pie crust, which is rolled out individually.

Photo: Brant Ward, The Chronicle

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A Three Babes Bakeshop salty honey walnut pie sits next to one of the handmade crusts. The pies are made with organic and locally produced ingredients.

A Three Babes Bakeshop salty honey walnut pie sits next to one of the handmade crusts. The pies are made with organic and locally produced ingredients.

Photo: Brant Ward, The Chronicle

Baking business isn't as easy as pie

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Four days after Lenore Estrada and Anna Derivi-Castellanos opened Three Babes Bakeshop in 2011, business blew up - in a good way.

DailyCandy, an e-mail newsletter, caught wind early of their pie-making enterprise, published a blurb and the two women couldn't bake fast enough. Soon they were getting calls from food magazines and the "Today" show. And when Food & Wine said their pies were among the best in America, the two entrepreneurs, friends since high school, felt they'd become an overnight sensation.

The problem was that the "bakeshop" part of their name was a misnomer. There was no retail store or bakery where customers could pick up pies. The women - they started with three, but the third one quit in the first year - baked in a commercial kitchen by night, took orders over the Internet by day and delivered the pies on Friday, but only in San Francisco. On weekends they'd set up a "pop-up" store - mostly in an old shipping container in the Mission or wherever they could find space.

Now, like a lot of fledgling artisan food businesses that start with the pop-up model, the 29-year-olds are at a crossroads. They've come too far to continue being nomadic pie merchants. Making the deliveries themselves is not cost effective.

And although they've been approached by large retailers, they would have to substantially reduce the price of their $35 pies, which they think would mean using inferior ingredients and walking away from their mission statement: showcasing their hometown Stockton's organic bounty of fruits and nuts. Plus, they weren't even making enough money to support themselves. Derivi-Castellanos still has a day job.

"We're wildly successful, but we can't even afford to pay ourselves," she said. "That's why I ask myself, 'What's next for us?' "

Their dilemma is not uncommon in the informal, spontaneous pop-up food world, where the business models can be as varied as the hours and location of operations.

Susie Wyshak, a food business consultant and strategist whose book "Good Food Great Business" is due out this year from Chronicle Books (no affiliation with this newspaper), knows how difficult it is to make that transition.

"This is what every food entrepreneur is faced with," she said. "I can say with assurance that every small, local business goes through the process of defining its vision. The great thing about starting as a pop-up is that it's a test run. It's like taking an extension class at school and deciding whether you want to get the degree."

Hiatus possible

That's why Three Babes is considering taking a three-month break to assess where they go from here. Shutting down the business when they've built momentum is risky, but in the end it may help Estrada and Derivi-Castellanos refine their concept.

"It's really hard to step back when you're baking and filling orders," Estrada said. "We've grown as much as we can grow this way. Now it's time to think outside the pie box."

They're contemplating opening a brick-and-mortar shop, but the expense is high and it might not be the best model for a pie business. They may consider expanding their pie online-ordering business, but they have to work out the delivery glitches. Currently they are using Good Eggs, an online market that takes orders and delivers.

Blake Joffe, who with his partner Amy Remsen started Beauty's Bagel Shop in Oakland as a pop-up, is all-too familiar with what it takes to narrow the vision. At first, he thought Beauty's would do more of a wholesale business, selling to restaurants and bakeries. The pop-up was a perfect test run.

"For us it was a way of working out the kinks," he said. "There was more leeway for screw-ups because we could just say, 'Hey, we're a pop-up.' "

Drawing attention

In addition, the pop-up, trendy these days in the food world, got Beauty's a lot of buzz. Like Three Babes, the bakers' wood-fire-oven bagels got a fair amount of publicity.

"We used that press to get a loan for our brick-and-mortar operation as well as convincing a landlord to give us a chance," Joffe said. It also gave them lines out the door on the day they opened, which wasn't such a good thing.

"By 9 a.m. I had to tell people they couldn't buy a dozen," he said. "By noon we were out of bagels. The Yelp reviews were terrible."

Since then he and Remsen have determined that wholesale isn't their best route. They are better off focusing on their retail operation since delivery service is expensive and the retail market for their bagels is thriving.

"It's important to strike while the iron is hot," he said. But having gone through it himself, he sees the Three Babes quandary.

"If you're running yourself ragged, it might be time to take a break and figure out a way to relaunch."